March 28, 2011

Summary:
DeKalb County, Georgia;
Appropriations; General Obligation;
General Obligation Equivalent
Security; Water/Sewer
Primary Credit Analyst:
Andrew R Teras, New York 212-438-7983; andrew_teras@standardandpoors.com
Secondary Contact:
John Sugden-Castillo, New York (1) 212-438-1678; john_sugden@standardandpoors.com

Table Of Contents
Rationale
Related Criteria And Research

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Summary:
DeKalb County, Georgia; Appropriations;
General Obligation; General Obligation
Equivalent Security; Water/Sewer
Credit Profile
Dekalb Cnty wtr & swr
Long Term Rating NR Withdrawn
De Kalb Cnty GO
Long Term Rating NR Withdrawn

Rationale
Standard & Poor's Ratings Services lowered its long-term rating on DeKalb County, Ga.'s general obligation (GO)
debt to' BBB' from 'AA-' and its long-term rating on the county's appropriation-backed debt to 'BBB-' from 'A+'.
Following its lowering of the ratings, Standard Poor's withdrew its ratings on the county's GO and
appropriation-backed debt, reflecting its view of county officials' inability to provide sufficient and consistent
information regarding the county's current liquidity position and how they will manage projected cash flow
imbalances in the near term.

At the same time, Standard & Poor's lowered its rating on the county's outstanding water and sewer revenue bonds
to 'AA-' from 'AA+' and subsequently also withdrew those ratings.

The downgrade of the GO debt reflects our opinion of:

• The county's deteriorating finances, as evidenced by multiple years of deficit operations that have contributed to
substantially weakened liquidity and a negative fund balance in the county's major operating tax funds;
• A negative cash position in the county's major operating tax funds as of Dec 31, 2010, which necessitated
internal fund borrowing to make GO debt service payments on Jan. 1, 2011, coupled with a lack of
institutionalized policies and procedures in place to guide cash management across funds; and
• The absence of structural solutions and timely budget adjustments to fully offset the structural budget imbalance.

Offsetting factors supporting the current rating level are the county's:

• Action on certain budget adjustments that appear to have somewhat limited the pace of deterioration in reserves
and liquidity;
• Good income and wealth levels; and
• Diverse economy that, while continuing to experience the effects of the economic downturn, has positive
long-term prospects.

The county's financial position has declined precipitously in the past two audited fiscal years. At the end of fiscal
2007, the total unreserved fund balance in the county's general and special tax district funds was $14.8 million.
However, by the end of fiscal 2009, not only had the unreserved fund balance decreased to negative $34.5 million,

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 Summary: DeKalb County, Georgia; Appropriations; General Obligation; General Obligation Equivalent Security;
Water/Sewer

but the county had also reported that it had no cash on the balance sheets of either its general or special tax district
funds. Preliminary financial information provided by the county for fiscal 2010 (ended Dec. 31, 2010) appears to
indicate further deterioration of the county's fund balance position and a continuation of a substantially weakened
liquidity position.

The chief executive officer's (CEO) fiscal 2011 recommended budget, released in December 2010, totaled $563
million (0.9% spending increase from the previous year) and included a 2.32-mill rate increase (14%) in an effort to
help mitigate budget pressure stemming from the county's deteriorating revenue base. However, in February 2010,
the county commissioners voted to approve a 2011 budget without the property tax increase, necessitating an
additional $34 million in spending cuts that must be implemented during the fiscal year. We understand a property
tax increase could be reconsidered as a midyear budget amendment. This is the second consecutive year the county
commissioners have rejected the CEO's proposal for a millage rate increase.

In addition to the same management concerns related to the GO debt, the downgrade of the revenue bond debt
reflects:

• Uneven coverage levels, and

• A recent sharp decrease in liquidity.

Based upon audited financial results, debt service coverage levels, as calculated by Standard & Poor's, have
fluctuated over the past three fiscal years: to 1.70x in 2009 from 0.71x in 2008 and 1.64x in 2007. Furthermore,
liquidity has weakened, with unrestricted days' cash on hand decreasing to 45 days in fiscal 2009 from 201 days in
fiscal 2007.

Related Criteria And Research

• USPF Criteria: GO Debt, Oct. 12, 2006
• USPF Criteria: Appropriation-Backed Obligations, June 13, 2007
• USPF Criteria: Standard & Poor’s Revises Criteria For Rating Water, Sewer, And Drainage Utility Revenue
Bonds, Sept. 15, 2008

Ratings Detail (As Of March 28, 2011)

DeKalb Cnty wtr & swg

Unenhanced Rating NR(SPUR) Withdrawn

DeKalb Cnty Bldg Auth, Georgia
DeKalb Cnty, Georgia
DeKalb Cnty Bldg Auth (DeKalb Cnty) rev bnds
Long Term Rating NR Withdrawn
DeKalb Cnty Pub Safety & Judical Facs Auth, Georgia
DeKalb Cnty, Georgia
DeKalb Cnty Pub Safety & Judical Fac Auth rev bnds (Public Safety & Judicial Facility Proj) ser 2004 due 12/01/2025
Long Term Rating NR Withdrawn
Georgia Association of County Commissioners, Georgia
DeKalb Cnty, Georgia

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 Summary: DeKalb County, Georgia; Appropriations; General Obligation; General Obligation Equivalent Security;
Water/Sewer

Ratings Detail (As Of March 28, 2011) (cont.)

Georgia Assn of Cnty Comrs certs of part bnds (Dekalb Cnty Georgia Pub Purp Proj) ser 2003
Long Term Rating NR Withdrawn
Many issues are enhanced by bond insurance.

Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at
www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public
Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.

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